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Discussion
A. Activity Not Engaged In For Profit Under Section 183(c)
Under section 183(a), if an activity is not engaged in for
profit, then no deduction attributable to that activity is
allowable except to the extent provided by section 183(b). In
essence, section 183(b) allows deductions to the extent of gross
income derived from such activity.
Section 183(c) defines an activity not engaged in for profit
as “any activity other than one with respect to which deductions
are allowable for the taxable year under section 162 or under
paragraph (1) or (2) of section 212.” Deductions are allowable
under section 162 or under section 212(1) or (2) only if the
taxpayer is engaged in the activity with the “actual and honest
objective of making a profit.” Ronnen v. Commissioner, 90 T.C.
74, 91 (1988); Fuchs v. Commissioner, 83 T.C. 79, 97-98 (1984);
Dreicer v. Commissioner, 78 T.C. 642, 645 (1982), affd. without
opinion 702 F.2d 1205 (D.C. Cir. 1983); sec. 1.183-2(a), Income
Tax Regs. Although a reasonable expectation of profit is not
required, the taxpayer’s profit objective must be bona fide. See
Hulter v. Commissioner, 91 T.C. 371, 393 (1988); Beck v.
Commissioner, 85 T.C. 557, 569 (1985).
Whether the requisite profit objective exists is determined
by evaluating all surrounding facts and circumstances. Keanini
v. Commissioner, 94 T.C. 41, 46 (1990); sec. 1.183-2(b), Income
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